8x8, Inc.
Oct 20, 2010

8x8, Inc. Announces Record Second Quarter Fiscal 2011 Earnings

Record Quarterly Revenue of $17.4 Million and Net Income of $2 Million, or $0.03 Per Share; Business Customer Churn Declines to 2.2%

SUNNYVALE, Calif., Oct 20, 2010 (GlobeNewswire via COMTEX News Network) -- 8x8, Inc. (Nasdaq:EGHT), provider of innovative business communications solutions, today announced financial operating results for the second quarter of fiscal 2011 ended September 30, 2010.

Total revenue for the second quarter of fiscal 2011 was $17.4 million, an increase of 8% compared to revenue of $16 million for the same period of fiscal 2010. Total revenue for the six-month period ended September 30, 2010 was $34.2 million, an increase of 8% compared to revenue of $31.6 million for the same period of fiscal 2010.

Net income for the second quarter of fiscal 2011 was $2 million, or $0.03 per share, an increase of 47% compared to net income of $1.3 million, or $0.02 per share, for the same period last year. Net income for the six-month period ended September 30, 2010 was $3 million, an increase of 71% compared to net income of $1.8 million for the same period of fiscal 2010.

Business customer churn decreased to 2.2%, compared to a churn rate of 2.7% for the same period last year. The Company ended the quarter with 22,167 business customers, up from 18,199 customers a year ago.

"The second quarter of fiscal 2011 was 8x8's strongest quarter ever and a pivotal period for the company and its shareholders as our business voice and managed hosting services delivered the highest revenue and net income levels in the Company's history as a publicly traded entity," said 8x8 Chairman and CEO Bryan Martin. "The record-setting results we reported this quarter, including the reduction in churn to the lowest level in 8x8's history, are a testament to the value our services are delivering to small and medium-sized businesses and a manifestation of the operational efficiency of our business model. In addition to these accomplishments, our results this quarter are a clear indication that a significant portion of each new dollar of recurring revenue is now falling directly to the bottom line due to our migration to higher margin revenue and the ongoing optimization of our cost structure."

During the second quarter of fiscal 2011 ended September 30, 2010, 8x8 repurchased 1,565,713 shares of its common stock under its share repurchase program at an average share price of $1.70 and a total cost of $2,668,182. Between July 2009 and September 30, 2010, the Company repurchased 1,945,789 shares at an average share price of $1.54 and a total cost of $2,999,984. 8x8 ended the second quarter of fiscal 2011 with $17.9 million in cash and cash equivalents.

With the completion of the initial share repurchase program, 8x8's Board of Directors approved a new share repurchase plan on October 19, 2010, authorizing the Company to repurchase up to $10 million of its outstanding common stock from time to time until October 19, 2011. Share repurchases, if any, will be funded with available cash. Repurchases of the Company's common stock may be made through open market purchases at prevailing market prices or in privately negotiated transactions. The timing, volume and nature of share repurchases are subject to market prices and conditions, applicable securities laws and other factors, and are at the discretion of the Company's management. Share repurchases may be commenced, suspended or discontinued at any time.

Q2FY'11 Business Highlights:

  --  Grew top line revenue to a record $17.4 million, up 3% from $16.8
      million for the previous quarter and 8% from $16 million for the same
      period of fiscal 2010
  --  Posted net income of $2 million, or $0.03 per share, compared to $1
      million, or $0.02 per share, for the prior quarter and $1.3 million, or
      $0.02 per share, for the same period last year
  --  Reported record operating income of $2 million, up 132% compared
      sequentially to operating income of $842,000 in the first fiscal quarter
      and 41% compared to $1.4 million in the same period last year
  --  Reported operating margin of 11% compared to 5% in the previous quarter
      and 9% in the same period last year
  --  Reduced customer churn to 2.2% compared to 2.5% in the previous quarter
      and 2.7% in the same period last year
  --  Repurchased 1,565,713 shares of its common stock under its share
      repurchase program at an average share price of $1.70 and a total cost
      of $2,668,182. As of September 30, 2010, the company had 62,570,250
      shares outstanding
  --  Approved new share repurchase plan in the amount of $10 million,
      bringing to $13 million the total dollar amount in the Company's stock
      repurchase plans since July 2009
  --  Added an East coast data center location to service the Washington, DC
      area
  --  Completed enhancements to 8x8's unified communications solution, which
      was released on October 4, 2010 as 8x8 Virtual Office Pro 2.0


Management will host a conference call to discuss these results and other matters related to the Company's business today, October 20, 2010, at 4:30 p.m. ET. The call is accessible via the following numbers and webcast links:

  Dial In:        (877) 843-0417, domestic
                  (408) 427-3791, international
  Replay          (800) 642-1687, domestic - ID 14748404
                  (706) 645-9291, international - ID 14748404
  Webcast:        http://investors.8x8.com/
  Additional
   presentation   http://virtualmeeting.8x8.com/Q2FY2011Earnin
   materials:     gs

Supplemental financial slides will be presented through 8x8's Virtual Meeting web conferencing portal, which can be accessed at: http://virtualmeeting.8x8.com/Q2FY2011Earnings

About 8x8, Inc.

8x8, Inc. (Nasdaq:EGHT) leverages its patented software technologies to deliver high quality voice solutions and integrated messaging and video to businesses of any size with employees in any location on a wide variety of business telephony, web and mobile platforms. 8x8 also offers managed hosting and cloud-based computing services. For additional information, visit www.8x8.com.

Forward Looking Statements

This news release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934. These statements include, without limitation, information about future events based on current expectations, potential product development efforts, near and long-term objectives, potential new business, strategies, organization changes, changing markets, future business performance and outlook. Such statements are predictions only, and actual events or results could differ materially from those made in any forward-looking statements due to a number of risks and uncertainties. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to, customer acceptance and demand for our products and services, the reliability of our services, the prices for our services, customer renewal rates, customer acquisition costs, actions by our competitors, including price reductions for their telephone services, potential federal and state regulatory actions, compliance costs, potential warranty claims and product defects, our needs for and the availability of adequate working capital, our ability to innovate technologically, the timely supply of products by our contract manufacturers, potential future intellectual property infringement claims that could adversely affect our business and operating results, and our ability to retain our listing on the NASDAQ Capital Market. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's reports on Forms 10-K and 10-Q, as well as other reports that 8x8, Inc. files from time to time with the Securities and Exchange Commission. All forward-looking statements are qualified in their entirety by this cautionary statement, and 8x8, Inc. undertakes no obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.

NOTE: 8x8, the 8x8 logo, 8x8 Virtual Office and 8x8 Virtual Office Pro are trademarks of 8x8, Inc. All other trademarks are the property of their respective owners.

                               8x8, Inc.
              CONDENSED CONSOLIDATED STATEMENTS OF INCOME
          (In thousands, except per share amounts; unaudited)


                               Three Months Ended
                                                    Six Months Ended
                                  September 30,       September 30,
                               ------------------  ------------------

                                  2010     2009       2010     2009
                               ---------  -------  ---------  -------
  Service revenues               $16,071  $14,838    $31,434  $29,358

  Product revenues                 1,296    1,189      2,767    2,227
                               ---------  -------  ---------  -------

     Total revenues               17,367   16,027     34,201   31,585
                               ---------  -------  ---------  -------

  Operating expenses:
    Cost of service revenues       3,589    3,535      6,971    7,036
    Cost of product revenues       2,031    1,686      4,057    3,507
    Research and development       1,271    1,265      2,497    2,502
    Selling, general and
     administrative                8,525    8,156     17,883   16,729
                               ---------  -------  ---------  -------

     Total operating expenses     15,416   14,642     31,408   29,774
                               ---------  -------  ---------  -------
  Income from operations           1,951    1,385      2,793    1,811
  Other income, net                   12       31         34       43
  Income (loss) on change in
   fair value of warrant
   liability                           9     (90)        167     (97)
                               ---------  -------  ---------  -------
  Income before provision for
   income taxes                    1,972    1,326      2,994    1,757
  Provision (benefit) for
   income taxes                        3     (10)          7        7
                               ---------  -------  ---------  -------

  Net income                      $1,969   $1,336     $2,987   $1,750
                               =========  =======  =========  =======

  Net income per share:
   Basic                           $0.03    $0.02      $0.05    $0.03
   Diluted                         $0.03    $0.02      $0.05    $0.03

  Weighted average number of
   shares:
   Basic                          63,383   62,774     63,495   62,728
   Diluted                        64,847   62,873     64,807   62,832

                     8x8, Inc.
       CONDENSED CONSOLIDATED BALANCE SHEETS
             (In thousands, unaudited)



                              September   March
                                 30,       31,
                                 2010     2010
                              ---------  -------
  ASSETS
  Current assets
   Cash and cash equivalents    $17,875  $18,056
   Accounts receivable, net         804      554
   Inventory                      1,521    2,174

   Other current assets             877      665
                              ---------  -------
     Total current assets        21,077   21,449
  Property and equipment,
   net                            2,493    1,871

     Other assets                 2,186      392
                              ---------  -------

       Total assets             $25,756  $23,712
                              =========  =======

  LIABILITIES AND
   STOCKHOLDERS' EQUITY
  Current liabilities
   Accounts payable              $4,746   $3,780
   Accrued compensation           1,641    1,444
   Accrued warranty                 380      331
   Deferred revenue               1,513    1,310

   Other accrued liabilities      2,516    3,269
                              ---------  -------
     Total current
      liabilities                10,796   10,134
                              ---------  -------

   Other liabilities                 97      111
   Fair value of warrant
    liability                        --      167
                              ---------  -------
       Total liabilities         10,893   10,412


  Total stockholders' equity     14,863   13,300
                              ---------  -------
       Total liabilities and
        stockholders' equity    $25,756  $23,712
                              =========  =======

                           8x8, Inc.
       CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                   (In thousands, unaudited)


                                           Six Months Ended
                                             September 30,
                                          ------------------

                                             2010     2009
                                          ---------  -------
  Cash flows from operating activities:
  Net income                                 $2,987   $1,750
  Adjustments to reconcile net income to
   net cash
  provided by operating activities:
     Depreciation and amortization              599      539
     Stock-based compensation                   129      112
     Change in fair value of warrant
      liability                               (167)       96
     Other                                       34    (172)
  Changes in assets and liabilities:
     Accounts receivable, net                 (268)     (78)
     Inventory                                  634    (315)
     Other current and noncurrent assets      (134)    (208)
     Deferred cost of goods sold                (2)      104
     Accounts payable                           782    (817)
     Accrued compensation                       197      129
     Accrued warranty                            49       42
     Accrued taxes and fees                     268       46
     Deferred revenue                           203     (62)
     Other current and noncurrent
      liabilities                           (1,017)    (805)
                                          ---------  -------
     Net cash provided by operating
      activities                              4,294      361
                                          ---------  -------

  Cash flows from investing activities:
   Purchases of property and equipment      (1,080)    (660)
   Restricted cash decrease                      --      100
   Purchase of strategic investment           (315)       --
   Acquisition of Central Host, Inc.,
    net of cash acquired                      (998)       --

   Sale of property and equipment                 1        2
                                          ---------  -------
      Net cash used in investing
       activities                           (2,392)    (558)
                                          ---------  -------

  Cash flows from financing activities:
   Capital lease payments                      (18)     (29)
   Repurchase of common stock               (2,700)    (212)
   Proceeds from issuance of common
    stock                                       635      183
                                          ---------  -------
      Net cash used in financing
       activities                           (2,083)     (58)
                                          ---------  -------
  Net decrease in cash and cash
   equivalents                                (181)    (255)

  Cash and cash equivalents at the
   beginning of the period                   18,056   16,376
                                          ---------  -------
  Cash and cash equivalents at the end
   of the period                            $17,875  $16,121
                                          =========  =======

 8x8, Inc.
 Selected Operating Statistics


                                          -------------------------------------------------------------------------------------

                                             FQ209    FQ309    FQ409    FQ110    FQ210    FQ310    FQ410    FQ111    FQ211
                                          ----------------------------------------------------------------------------------
 Gross business customer additions (1)         3,324    2,437    2,792    2,907    2,609    2,785    2,875    2,756    2,450
 Gross business customer cancellations
  (less cancellations within 30 days of
  sign-up)                                     1,187    1,224    1,245    1,371    1,416    1,331    1,616    1,592    1,459
 Business customer churn (less
  cancellations within 30 days of sign-up)
  (2)                                           3.1%     2.9%     2.7%     2.7%     2.7%     2.4%     2.7%     2.5%     2.2%
 Total business customers (3)                 13,744   14,706   16,013   17,266   18,199   19,407   20,428   21,362   22,167

 Business customer average monthly service
  revenue per customer (4)                     $ 220    $ 208    $ 202    $ 196    $ 201    $ 204    $ 204    $ 208    $ 209

 Overall service margin                          73%      74%      71%      76%      76%      78%      77%      78%      78%
 Overall product margin                         -10%       9%     -50%     -75%     -42%     -59%     -43%     -38%     -57%
 Overall gross margin                            65%      67%      59%      66%      67%      68%      68%      68%      68%

 Business subscriber acquisition cost per
  service (5)                                  $ 171    $ 141    $ 118     $ 93     $ 90    $ 102     $ 97    $ 109    $ 108
 Average number of services subscribed to
  per business customer                          6.9      6.6      6.6      6.9      7.1      7.3      7.5      7.5      7.7
 Business customer subscriber acquisition
  cost (6)                                   $ 1,174    $ 933    $ 785    $ 638    $ 638    $ 749    $ 723    $ 818    $ 826
 (1) Includes 1,154 "Find me, Follow me" and 40 8x8 Virtual Office customers acquired in the second quarter of
  fiscal 2009 from Avtex Solutions, LLC ("Avtex") and 49 hosting customers acquired in the first quarter of fiscal
  2011 from Central Host, Inc. ("Central Host").
 (2) Business customer churn is calculated by dividing the number of business customers that terminated (after the
  expiration of the 30 day trial) during that period by the simple average number of business customers during the
  period and dividing the result by the number of months in the period. The simple average number of business
  customers during the period is the number of business customers on the first day of the period plus the number of
  business customers on the last day of the period divided by two.
 (3) Business customers are defined as customers paying for service. Customers that are currently in the 30 day
  trial period are considered to be customers that are paying for service.
 (4) Business customer average monthly service revenue per customer is service revenue from business customers in
  the period divided by the number of months in the period divided by the simple average number of business
  customers during the period.
 (5) Business subscriber acquisition cost per service is defined as the combined costs of advertising, marketing,
  promotions, commissions and equipment subsidies for business services sold during the period divided by the
  number of gross business services added during the period. The addition of 1,154 Avtex customers that migrated to
  8x8 in the second fiscal quarter of 2009 but subscribed to "Find me, Follow me" services rather than 8x8 Virtual
  Office service, and the $79,230 in expense related to the acquisition of these 1,154 customers, is excluded from
  this calculation. In addition, the expense to acquire the 49 Central Host customers in the first fiscal quarter
  of 2011 is excluded from this calculation.
 (6) Business customer subscriber acquisition cost is business subscriber acquisition cost per service times the
  average number of services subscribed to per business customer.


This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: 8x8 Inc.

CONTACT:  8x8 Inc.
Investor Relations Contact:
Joan Citelli
(408) 654-0970
jcitelli@8x8.com

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